mNectar CEO Wally Nguyen on the Future of Playable Mobile Ads

mNectar is known in the industry as one of the pioneers of the mobile playable ad unit — allowing users to ‘test drive’ an app before actually downloading it. What was the original vision of the company, and how has it evolved to where it stands today?

The original idea behind mNectar came from an experience most people are familiar with by now: I was on iTunes and sampling a bunch of different songs for 30 seconds, but when I switched over to the AppleApp Store, I couldn’t do the same thing. To get an app, I’d have to download it first, essentially sight unseen. We get to test drive cars, sample foods at Costco, but we can’t do that with apps. mNectar’s cofounder and CTO Artem came to the same conclusion, but more from a technology perspective, and together we came up with the idea for app sampling for games. We then raised money from game companies, including MobilityWare and Kabam, and they became our first strategic customers.

The idea of app playables is deceptively simple, but the technology was very difficult to master. We couldn’t just use off-the-shelf technology. It took us three years, but now we have deployed our own virtualization and streaming infrastructure — called Spectra — that has thousands of servers to handle streaming app playables to mobile users. This technology allows us to take any app and turn it into a playable in 15 minutes, with no labor required on the part of the developer. mNectar is the only independent provider of both app stream playables, which can be rewarded and force touch-enabled, and custom HTML5 playables, which we custom build to showcase the “killer app” moments of an app or game. This gives developers the most flexibility across the board.

I myself have been served quite a few mNectar playable ads – sometimes even playing the unit up to the full minute. Is there any possibility of these playable ads being ‘too’ engaging with the original developer losing the user to the new mobile app they just tried?

This question comes up a lot when we meet with developers, but we find that it that generally this isn’t the case. Fundamentally, mNectar’s playables move the focus of app discovery away from the app store and into the apps people already use and love, but in an unobtrusive, seamless way. We’re highly conscious of the user experience: playables are opt-in only, which means that a person chooses to sample a different app. If they stop interacting with the playable, a message pops up to ask if he or she would like to continue or exit and return to their original app. If someone chooses to install the app after trying it, once the download is complete, the person is redirected back to their original app in the same place he or she left it. It’s a seamless experience. We know from internal data, too, that apps that deploy playables have been shown to see their app store ratings go up, because users like the experience of playables over video ads and interstitials.

As for mobile ads being “too engaging,” I’d say most mobile ads today fall on the un-engaging and interruptive side of the equation. Mobile video ads are really popular right now, and while I believe they are an improvement over banner ads and interstitials, I still think video ads remain passive experiences. Video ads may be more entertaining, but they don’t always give an accurate preview of the content. In fact, most people I know simply set their phones down and walk away until it finishes before they return to their game or app. I think mobile advertising needs to keep pushing toward more engaging formats that earn the user’s attention.

mNectar mostly works with mobile gaming companies such as GSN, Big Fish, GREE, King, SGN, Storm8, Zynga, but you also work with non-gaming companies such as HotelTonight and Audible. Can you share more on how your playable ad units work for non-game applications?

Any non-gaming app can be turned into a playable, and we’re seeing more brands enter the playable space. However, we realized that certain non-gaming apps have multiple functions and cannot be easily captured in a chronological 30- to 60- second stream. As opposed to games, where replicating the gameplay is priority, brands want eyeballs. That’s why we created the custom HTML5 playable offering, which allow brands to highlight a core feature of their app to users, or simply add more interactivity to their mobile ads.

Due to the success of the space, there have been others that have popped up in the playable ads arena, such as Voxel, Tresensa, CrossInstall, and even InMobi. What would you say is the core differentiator of mNectar?

mNectar is the only provider of both app stream playables and custom HTML5 playables, and we have our own ad network. Because we have our own data servers and streaming technology, we’re the only company that can stream playables to any person using any mobile device across any network connection, from WiFi to LTE to EDGE. Google’s Search Trial-Run Ads, for example, require Wifi. As for startups, companies like Tresensa and CrossInstall are focused on HTML5 playables. We have huge respect for Tresena, as they were one of the first playable providers after mNectar and do great brand work. Voxel is another company, who partnered with InMobi, but they recently pivoted away from app streaming to focus on their search product.

What model do you pay out your mobile publishing partners on? How have their eCPMs compared to other ad units like rewarded video, or interstitials?

We pay our publishers on a CPM basis, and playables perform anywhere from two to five times better compared to interstitials and video ads. On the developer side, playables have a high conversion rate – seven times greater than mobile video ads, which are hot right now. When we did internal testing between video ads and playables, I didn’t expect this result. There are more than 2 million apps, and obviously a wide range of quality and complexity. My naive assumption was that if you let someone sample a crappy game, they won’t download. Surprisingly, that hasn’t held true. Regardless of game type, and personal taste aside, people are still downloading after engaging with a playable because they trust experience and they know what they are gonna get before they download. There is confidence in the download decision because there are no big surprises. That also translates to retention. User retention rates for playables are also twice as good as mobile video ads and four times as good as standard interstitials.

Playable units are extremely engaging for users, however there are some questions of scale. To the extent that you can reveal, can you share more on the scale of mNectar, and where you think it can be over the coming years?

We’re optimistic about app stream playables in part because they can scale. HTML5 playable ads can take anywhere between five days and two weeks for most companies to build. You can create HTML5 playable ads for all two million apps, but if you do a simple back-of-the-envelope calculation, it would take 20,000 years to build. With app streaming, it would take one and a half years and would require no engineers or designers. mNectar can virtualize and stream a playable and deploy it to the user in approximately 15 minutes. Recently, we reached a 30 percent weekly growth rate of users engaging with and completing a playable, which can be anywhere from 30 seconds to one minute. We are streaming around 250 apps, and have added on average a dozen apps per week since the beginning of the year. We’re excited about the next few years as we continue to attract more developers outside of the gaming category, as brands are beginning to adopt playables because they see the importance of demonstrating to users how their app adds value.

What are some innovations happening in mobile today that excite you the most?

Pokemon GO is exciting from the perspective that it leverages augmented reality (AR) in a way that breathes new life into mobile gaming. AR is probably more mass-market and appealing than VR in the sense that it doesn’t require extra gear and can be played from devices we already have.

Google acquired app streaming startup Agawai in mid-2015, with plans to use their streaming technology for their app install business. In early 2016, the service came out of beta with Google announcing the ability to stream apps to your Android phone, without having to download the app. What do you think the impact of this will be on the mobile user acquisition ecosystem at-large?

Obviously, anyone who is developing an app – particularly startups – face huge uphill discoverability challenges. Some even say we’ve reached peak app. Google is a leader (and we consider our main competitor) in a post-download future, where we don’t have to install apps in order to access the content or service. Their recent Android Instant Apps announcement is the latest in a series of moves Google has made – including Search Trial-Run Ads – to chip away at the walled gardens that apps create. On the surface, Android Instant Apps could be viewed as power grab by Google to ensure that people use their mobile web browser more than apps. This would be to the detriment of app developers. On the other side of the coin, Android Instant Apps could be beneficial to developers because it allows an app to be broken down into modules that are then exposed to people broadly through links. In that respect, Instant Apps could really help the retention side of the equation because people have experienced what’s useful or entertaining, and if and when they download it, they will be more likely to use it long-term.

There has been an explosion in the number of ad networks a mobile developer can now work with for user acquisition, many of which are almost completely undifferentiated, with no tech and just re-brokering inventory. Do you think that this is sustainable, and how do you think this will play out over the coming years?

Generally, ad formats on their own aren’t defensible. Formats like banners, interstitial, and video take a creative team. These swap out pretty fast based on who can get more budget and spend. Not only that, but there is ad saturation on users who are seeing the same type of ads over and over. Mary Meeker pointed out in her recent Internet Report that video ads lead to 93% of users considering to install ad blocking software to quiet down the noise. Over time, the break-out mobile ad companies aren’t the ones that can just re-broker inventory and ad spend, but those that develop scalable technology.

At some point, the mobile app install business as it’s currently set up will burst. App install advertising is entirely geared toward the initial download, even when all signs are pointing to the death of downloads. We know from the data, that one out of four people only use an app once before abandoning it. At the same time, average cost-per-install (CPI) rates are around $5 to $8. That means advertisers are paying $5 to $8 to acquire users, of which 25% will go on to abandon the app after one use. So advertisers are essentially paying for a barrier to discovery and wasting a lot of money in the process. This is simply unsustainable for both developers and adtech companies over the long term. If you’re a big name brand or game studio, you may be able to stomach the losses, but for startups, the economics are clearly stacked against you. Because of downloads, mobile is stuck in the 1990s. Ultimately, I believe that we’re moving toward a future in which all apps are streamed, where you don’t have to download or store anything on your phone in order to access the content or service. In this future, mNectar thrives, as we have the infrastructure to support app streaming. Alongside app streaming, I believe we’ll continue to see the rise of chatbots like Facebook Messenger, and the rise of messaging apps like WeChat that roll multiple services into a single hub.

mNectar is the leader and pioneer in mobile application streaming. We are simplifying, automating, and transforming how consumers discover and engage with mobile applications. mNectar’s Playable allows consumers to instantly play, use, and sample mobile apps without downloading.

Funded by New Enterprise Associates and independent mobile app developers.

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